Ukraine and EU sign free trade zone deal

Ukraine's President Petro Poroshenko poses with European Commission President Jose Manuel Barroso (L) and European Council President Herman Van Rompuy (R) at the EU Council in Brussels June 27, 2014 (Reuters / Stringer) / Reuters

Ukraine has signed the economic part of the Association Agreement with the EU, with Georgia and Moldova also joining the pact, even though big economic risks lie ahead.

The signing of the economic part of the agreement comes after 8
months of violent unrest in Ukraine, which broke out in Kiev and
spread across the country in November after then-President Viktor
Yanukovich decided to reject the trade agreement in favor of trilateral
talks.

The document contains 31 signatures - Ukraine, all 28 EU member
states, as well as that of the President of the European Council
Herman Van Rompuy, and European Commission President Jose Manuel
Barroso. The agreement will only come into force when it is
ratified by every national parliament in the EU. It is expected
that the ratification process will be complete by this fall.

Georgia and Moldova also signed both political and economic parts
of the Association Agreement. Ukraine signed a political part of
the agreement in March, shortly after Crimea rejoined Russia.

"By signing the association agreement, Ukraine, like European
nation, which shares the same rules of law, stresses its
sovereign choice to become a member of the EU Association
Agreement in the future," said Ukraine's President
Poroshenko before the signing ceremony. The Ukrainian President
sees the trade document as a stepping stone to eventual EU
statehood.

Friday signing the Free Trade Agreement will open up trade
barriers between the former Soviet states, but doesn’t guarantee
them EU membership, a main goal of the three governments.

“It is their sovereign right, but the Russian Federation will
have to take measures in case it negatively effects the local
market,” Dmitry Peskov, Putin’s spokesperson said,
commenting on the agreements signed between the EU and Ukraine,
Georgia and Moldova.

Russia has warned these "measures" could include $500
billion in lost trade and possible bans on Ukrainian
imports.

“There is no economic growth to be had by suddenly having
western European goods dumped at low cost on your
marketplace,” Patrick Young, an expert on emerging markets,
told RT.

In order to fully implement the free trade zone, it could cost
Ukraine’s already fragile economy an additional $104 billion,
according to a previous estimate by Yanukovich. This will include
adopting hundreds of new trade laws and thousands of new laws to
comply with EU standards.

Ukraine exported 13.8 billion euro worth of goods to the EU,
mostly materials like iron, steel, and minerals. Agricultural and
food products are also substantial exports.

The Association Agreement and Deep and Comprehensive Free Trade
Area (DCFTA) will replace the current Partnership and Cooperation
Agreement Ukraine signed with the EU in 1998.

Eastern Ukraine, which rejects the new Ukrainian government's
authority, is skeptical of Kiev’s European ambition, as is the EU
itself.

“EU is not ready to integrate at this stage a country like
Ukraine,” Jose Barroso, President of the European Commission
said before the talks.

Brussels started the Eastern Partnership initiative to
incorporate six former Soviet Republics into the EU free trade
zone. Ukraine, Moldova, and Georgia have followed Poland’s
example, whereas Armenia, Belarus, and Azerbaijan are likely to
opt for closer trade links with Russia.

Trilateral trade talks between the EU, Russia, and Ukraine will
take place on July 3-4. Russia has made it very clear that by
signing the trade agreement Ukraine can no longer enter the
Eurasian Customs Union, which already
includes Belarus and Kazakhstan.